Modeling Government Expenditures

Government expenditures both as a utility good and as a production input are added to the model. The quantitative implications of different levels of government expenditures and efficiency are examined.

Money Supply Rules and Interest Rate Rules

In this chapter we introduce various formulations of central bank policy rule consider their implications within the context of our model. We introduce preference shocks to our model to create a motivation for smoothing by the central bank.

Some History

This chapter discusses the results of historical studies of the empirical relationship between output growth, inflation and money growth. It seeks to relate these results to the quantitative implications of our model.

Introduction

Introduces the text and lays out the vision as to what is to be covered and how this will be done. The chapter discusses the role of quantitative analysis in policy debates and how the text will prepare the reader to engage in and understand these debates in Macroeconomics.

Python and Dynare Code

In this chapter a variety of different sample codes are provided in Python, complementing the Matlab code in the main text. In addition, Dynare (an open source add-on to Matlab) code is provided for the business cycle model.

A Model of Money and Capital

Our baseline model is extended to include capital in the production process as in the standard Solow growth model. Balanced growth paths are characterized, and these are related to Kaldor’s growth facts.

Math Reviews

This chapter reviews the math and probability theory we use in the text. Derivatives and Lagrangians are covered in some detail.

Optimal Monetary and Fiscal Policy

We construct the Ramsey problem for our model. We use this to examine optimal monetary and fiscal policy.

Taxes in Our Model: Take 1

Our model of money, capital and labor is extended to allow for labor and capital taxes. We then construct a quantitative version of the model and use it to illustrate how revenue increases and then decreases as we increase tax rates. We also show how low capital taxes are associated with better balanced growth outcomes.

Price-Setting and Information Frictions

This chapters shows how to construct a New Keynesian by changing the timing of monetary injections and imposing an information friction. We show the model implies an expectational Phillips Curve. We then discuss how to simulate our model on the computer.